What you need to know before the first investment in cryptocurrency
I would like to tell you about the hard (and expensive) lessons that I would love to know before I started to invest in the cryptocurrency.
After two years of trading cryptocurrency on the terms of full, part-time, here are the most important lessons that I learned from my bitter experience:
Lesson # 1: Think of a strategy
How often have you heard: “I’ve learned that bitcoin is a good investment, not whether I buy it?”
Those who start a conversation like that, just doomed to failure investment.
Not that I think buying bitcoin is a bad investment, but there are many moments that are really worth discussing, apart from the question of which currency is a good investment.
You need to thoroughly think through the strategy from start to completion of the transaction. It is necessary to consider your expectations regarding growth, time, risk and amount of capital that you are going to invest. You must give a clear answer to these questions even before your first investment.
I’ve seen too many people who pursue the latest trend, buy the currency at an artificially inflated price or just following untested advice. Sometimes these people manage to make some good deals. But in the long run they all fail.
Before beginning investing, consider how much money you are willing to risk, how much time and effort you will be able to invest in it, what should be the timeframe for investments, and at what point you need to complete the transaction.
Lesson # 2: Determine what type of investors do you think
In this matter your personality type. Psychology in the cryptocurrency trading has much more importance than it seems at first glance. It is therefore important to follow the strategy that best fits your personality, otherwise it could end in disaster.
There are three basic types of cryptocurrency investors:
It’s the guys who watch the exchanges 24/7. They constantly monitor the situation by buying and selling currency multiple times during the day. This approach implies a greater intensity, constant risks and a high level of adrenaline in the blood. Among most people I know day traders are young people who never drink coffee. If such a rhythm is not for you — don’t even think about day trading.
Similar to day traders, but the intensity is less. Generally, investments take a longer period of time: from several days to several weeks. On average, a few purchases and sales of currencies in a week that already allows you to do this not full time. Most of my friends traders are swing traders.
And it’s the guys who are buying the currency and are its owners for a long time. These include the guy who bought bitcoin 7 years ago and still keeps it. And those people who have decided to allocate 1% for the cryptocurrency of your diversified portfolio. Long-term investors are not interested and do not account for intraday, daily or weekly race currencies. They review and evaluate their investment within a few years. Model of long-term investment ignoring short-term fluctuations.
First, determine what type of trader you are.
Any cryptocurrency as a temptress, will try my best to take you from the principles of your trading “personality”. Do not allow this to happen because it would end in disaster. Stick to the strategy that is best suited to your character, because it will help to determine which deals you can consider, and what — not.
Lesson # 3: don’t buy bad cryptocurrency
Or in other words: buy the crypto currency that has intrinsic value. Do not buy strange currency, just because its price is rising or advise a friend.
Unfortunately, many cryptocurrencies can be attributed to bad. To date, more than 1500 different cryptocurrencies already actively buy and sell, and another 1,000 new came on the market just this year. It is clear that with such volumes about the quality of most of them doesn’t have to think.
But are there any good cryptocurrency? Of course, these include critobulus that have intrinsic value.
These cryptocurrencies have a clearly defined demand in the market, large user community, team development and proven ability to achieve results. And probably most importantly — financial support.
Such cryptocurrencies are financed with venture capital, and probably had received the approval from recognized financial experts. By the way, the insights of financial experts can be a good tip on how cryptocurrency makes sense to buy, because their advice is followed by companies engaged in venture capital financing.
The more money to pay salaries and run marketing campaign — the better the chances of success of the project.
However, this rule has its exception — day traders constantly buying bad cryptocurrency. This is one reason why intraday trading is risky. And yet my advice remains the same: don’t buy bad cryptocurrency, otherwise you’ll be left with nothing.
Lesson # 4: Self-study all the questions
Unfortunately, the cryptocurrency market is governed by fear, uncertainty, doubt and fear out of the game. Cryptocurrency trading is a psychological game which you need to master. Learn to make your own conclusions. In this market there oracles, and the financial experts offer a qualified guess.
If you can not investigate, you have to rely on the insights of others. In my experience, the best investment was the purchase of those cryptocurrencies, I found myself before they became popular and they started talking.
The ability to examine any issue — a very important skill which you will rescue, if the right to master. It is closely connected with the development of critical thinking, pattern recognition and the ability to balance logic and emotions.
Self-evaluation and formation of own opinions will help you succeed in understanding the psychological component of this process.
Lesson # 5: Start with small amounts
Over the past two years in two different cases, your hundred dollar investment turn into $ 5,000 within a few months.
It is possible.
Start small. This will allow you to avoid costly mistakes small price. Your success is rewarded with more capital for investment. The better your skills, the more profitable your trades. The more profitable your trades are, the more volume you can handle.
Such a beginning also implies that virtually anyone from anywhere can participate in the auction. You don’t need large amounts of money to trade cryptocurrency. I even insisted on it, especially if you are just starting out.
Consider this: the market is gradually rewards you for your skills. The better your skills, the more profitable your trades and the more you have capital, which can be put into circulation.
There is a learning curve, and you can’t buy this knowledge for money.
This knowledge can only be obtained in practice. First you invest in yourself — in your trading skills. You’ll know when these skills will improve because the capital that will be at your disposal for investment, will increase in proportion to your abilities.
In addition, there is an important psychological moment in a situation when you build from scratch their capital in the cryptocurrency market.
Most people have problem with money. If you start to think about their transactions in the key “the amount of this investment is equivalent to 3 months working full time”, it will definitely affect your ability to do a balanced deal.
When you start with small amounts and the whole process seems a game. The most that you can lose is your $ 100. At any time you can withdraw a percentage of earnings as a reward for his success. Just continue in this spirit.
It took a lot of money, time and frustrations before I learned these lessons. However, investing in crypto-currencies can be simple, interesting and extremely profitable if the right approach.
Similarly, cryptocurrency trading can devastating impact on your finances, if the approach was wrong.
For all traders, or those just thinking about it, I would advise not to take the time to enjoy the process and listen to the above advice.